Aviva NDB earns Rs. 621 m profit from 15% UAL stake sale

Aviva NDB Insurance Plc is estimated to have made a profit of Rs. 621 million from the sale of 15% stake in Union Assurance Plc yesterday.

The stake held in blocks of 5% each or 1.875 million shares were sold to UAL’s controlling shareholder JKH at Rs. 150 each (at a discount to the market) in a deal worth Rs. 840 million.

In Aviva NDB book cost of the longstanding stake was stated at Rs. 39 per share which translates to a profit of Rs. 621.6 million from the sale. Last year Aviva NDB reclassified a part of the UAL stake to dealing equity from strategic equity. The General Fund had a 5% stake whilst the balance had been held under the Life Fund.

Purely on hefty capital gains investors toasted the sale as Aviva NDB share price shot up by Rs. 29 to close at Rs. 299.70 whilst it peaked to a high of Rs. 322.90.  UAL closed on Thursday at Rs. 175.70 and peaked to a high of Rs. 180 before closing at Rs. 165.40, down by Rs. 10.30. With the acquisition by JKH, the Group stake in UAL rose from 80.7% to 95.6%.

Analysts said the purchase reflects JKH’s confidence on insurance business in addition to the strike price being attractive.

The deal generated the highest turnover and helped to boost the Bourse’s overall figure to Rs. 2.5 billion.

Bourse loses steam

After enjoying two days of gains, the Colombo Bourse dipped yesterday raising concerns whether the rebound earlier was a fluke.Both ASI and MPI dipped by over 1% each after having gained by nearly 4% in the previous two market days.   “Prices gained tentatively in early trading only to tumble later on.  As expected the demand that was seen over the last two days got faded today.

The volatility and low turnover levels may continue next week,” NDB Stockbrokers said.

“Credit restrictions at broking houses taking effect from 31 March may result in selling. However buying may also be visible with the financial year ending on the 31 March and the need to window dress equity portfolios,” it added.

Reuters said market closed weaker as investors cashed in to free up capital for upcoming initial public offerings, amid continued forced selling.

The SEC has ordered brokers to recover 50 percent of the total debts by the end of this month and stop all credit transactions by 30 June, and that has set off continuous forced selling.  

Foreign investors were net sellers of 263.7 million rupees’ worth of shares on Friday and have sold a net 4.5 billion rupees’ worth in 2011, after selling a record net 26.4 billion in 2010.

The bourse is still Asia’s best performer with an 8.3% gain in 2011 after bringing in the region’s top return with 96% last year.

Traded share volume was 104.1 million, against a five-day average of 56.2 million. The 30-day and 90-day average trading volumes were 79.5 million and 68.3 million respectively. Last year’s daily average volume was 67.9 million.

The rupee closed weaker at 110.40/50 a dollar from Thursday’s close of 110.35/40 on importer dollar demand, traders said.